In Media Releases

Media ReleaseSurvey of Foreign Exchange and Derivatives Markets

Number2007-15

Date26 September 2007

Background

In April 2007, the Reserve Bank conducted a survey of activity in foreign exchange
and over-the-counter (OTC) derivatives markets in Australia. This was part
of a global survey of 54 countries,
co-ordinated by the Bank for International Settlements (BIS). Similar
surveys have been conducted every three years since 1989.

Activity in Australia's foreign exchange and derivatives markets has continued
to increase rapidly since the previous survey in 2004. Total turnover has
more than doubled, and has increased across all instruments, counterparties
and currencies. In terms of global turnover, the Australian foreign exchange
market is the seventh largest in the world and the AUD/USD is the fourth
most traded currency pair. These rankings are unchanged from the previous
survey.

The preliminary results of the global survey and links to other participating nations'
results are available from the BIS website at www.bis.org/press/p070925.htm.
Results for the Australian market are summarised below and in the attached
tables.

In April 2007, foreign exchange turnover averaged US$170 billion per day, compared
with US$81 billion per day in April 2004. This is an increase of 110 per cent at current exchange rates and 90 per cent at constant exchange rates.

Transactions in the spot market grew by 74 per cent between 2004 and 2007. Activity
in the outright forwards market increased by 190 per cent and in the foreign
exchange swaps market by 120 per cent. Foreign exchange swaps continue to
represent the highest share of foreign exchange turnover, comprising 65
per cent of the Australian market.

The AUD/USD is the most traded currency pair in the Australian market, accounting
for 45 per cent of total foreign exchange turnover, a similar
proportion as at the time of the previous survey. EUR/USD is the second
most traded pair in the Australian market, at 14 per cent of total
turnover. Transactions in NZD/USD, USD/CHF and the “Other” currency
category (which predominantly involve Asian currencies) increased noticeably
as a proportion of total turnover, while the share of transactions in EUR/USD
and USD/JPY declined.

Transactions between local financial institutions increased by 387 per cent, and
now account for around 30 per cent of all turnover. Transactions with overseas
financial institutions, which account for over 60 per cent of turnover,
rose by 69 per cent. Transactions with non-financial institutions rose by
93 per cent.

In April 2007, total derivatives turnover in Australia averaged US$30 billion per
day, compared with US$18 billion in 2004. This is an increase of 68 per cent at current exchange rates and 52 per cent at constant exchange rates.

Transactions in interest rate derivatives, which account for the bulk of total derivatives
turnover, grew by 77 per cent between 2004 and 2007. Within this category,
turnover in interest rate swaps grew by 166 per cent while turnover in forward
rate agreements fell by 36 per cent.

Transactions in foreign exchange derivatives grew by 39 per cent between 2004 and
2007. Within this category, transactions with both currency swaps and options
contributed to the increase.

Derivative transactions with overseas financial institutions increased by 83 per
cent to US$20 billion per day, and account for around 70 per cent of all
derivatives turnover. Transactions with non-financial institutions increased
by 87 per cent to US$4 billion per day, while transactions with local financial
institutions increased by just 9 per cent.

Footnote

Note that only one leg of a swap contract is recorded to avoid double counting the
transaction.
[1]

Table 1: Australian Foreign Exchange Market Activity(a)(b)

Daily average turnover, US$ billion

By type of transaction

April 1995

April 1998

April 2001

April 2004

April 2007

Spot

against AUD

5.6

8.3

6.5

11.4

16.4

against other currencies

12.1

11.2

6.7

14.2

27.9

Total

17.6

19.6

13.2

25.5

44.3

Forwards

against AUD

0.8

1.5

2.3

3.1

6.2

against other currencies

0.5

1.0

1.2

1.9

8.2

Total

1.3

2.5

3.5

5.0

14.5

FX Swaps

against AUD

10.0

13.8

18.1

24.9

61.9

against other currencies

10.6

10.7

17.2

25.3

48.8

Total

20.6

24.5

35.3

50.3

110.7

Total

against AUD

16.4

23.6

26.9

39.4

84.6

against other currencies

23.2

22.9

25.1

41.4

84.9

Total

39.5

46.6

51.9

80.8

169.5

(a) Adjusted for local inter-dealer double counting.
(b) Totals may not sum due to rounding.

Table 2: Foreign Exchange Turnover in Australia by Currency Pair(a)

Per cent of total turnover

Currency Pair

April 1995

April 1998

April 2001

April 2004

April 2007

AUD/USD

42.0

48.2

49.4

44.7

45.2

AUD/EUR

–

–

0.5

1.0

1.3

AUD/JPY

–

–

0.8

1.0

1.0

EUR/USD

–

–

11.4

17.0

13.8

USD/DEM

21.7

13.5

–

–

–

USD/JPY

13.3

16.0

14.0

12.7

8.0

GBP/USD

7.0

5.4

6.4

6.2

5.8

NZD/USD

3.2

6.7

9.0

6.0

9.1

USD/CAD

0.8

0.7

2.7

3.2

2.0

USD/CHF

2.6

0.9

1.2

1.3

3.7

EUR/JPY

–

–

0.6

1.1

1.0

Other

9.4

8.6

4.0

5.8

9.1

(a) From April 1998 adjusted for local inter-dealer double counting. April 1995 data
based on gross turnover.

Table 3: Turnover by Counterparty(a)(b)

Daily average in US$ billion

By type of transaction

April 1995

April 1998

April 2001

April 2004

April 2007

Spot

Financial institutions – local

3.6

6.5

3.2

2.1

6.6

Financial institutions – overseas

9.8

10.2

8.0

19.7

32.0

Non-financial institutions

4.2

2.9

2.0

3.7

5.8

Total

17.6

19.6

13.2

25.5

44.3

Outright Forwards

Financial institutions – local

0.1

0.8

0.7

0.4

3.1

Financial institutions – overseas

0.4

0.9

1.6

2.8

9.4

Non-financial institutions

0.7

0.8

1.1

1.8

1.9

Total

1.3

2.5

3.5

5.0

14.5

FX Swaps

Financial institutions – local

4.3

8.4

8.7

7.3

38.0

Financial institutions – overseas

12.4

13.6

24.1

39.6

63.4

Non-financial institutions

4.0

2.6

2.4

3.3

9.3

Total

20.6

24.5

35.3

50.3

110.7

Total

Financial institutions – local

8.0

15.7

12.6

9.8

47.7

Financial institutions – overseas

22.6

24.7

33.7

62.1

104.8

Non-financial institutions

8.9

6.3

5.6

8.8

17.0

Total

39.5

46.6

51.9

80.8

169.5

(a) Adjusted for local inter-dealer double counting.
(b) Totals may not sum due to rounding.
Note: Financial institutions includes those reporting in the BIS survey as well
as non-reporting financial institutions.

Table 4: Australian OTC Derivatives Activity(a)(b)

Daily average turnover, US$ billion

By type of transaction

April 1995

April 1998

April 2001

April 2004

April 2007

Foreign Exchange Derivatives

Currency swaps

0.3

0.4

0.5

1.2

2.1

Options

0.8

1.3

1.6

3.6

4.7

Total

1.0

1.7

2.1

4.9

6.8

Interest Rate Derivatives

Forward rate agreements

2.0

1.5

5.5

5.6

3.6

Swaps

0.5

1.3

4.0

6.7

17.8

Options

0.3

0.1

0.3

0.5

1.3

Total

2.8

2.8

9.8

12.8

22.7

Total OTC Derivatives

3.8

4.6

12.0

17.6

29.5

(a) Adjusted for local inter-dealer double counting.
(b) Totals may not sum due to rounding.

Table 5: OTC Derivatives Turnover by Counterparty (a)(b)

Daily average turnover, US$ billion

April 1995

April 1998

April 2001

April 2004

April 2007

1. Foreign Exchange Derivatives

Currency Swaps

Financial institutions – local

0.1

0.1

0.2

0.4

0.4

Financial institutions – overseas

0.1

0.1

0.3

0.8

1.5

Non-financial institutions

*

0.2

0.1

0.1

0.2

Total

0.3

0.4

0.5

1.2

2.1

Options

Financial institutions – local

0.1

0.3

0.3

0.3

0.7

Financial institutions – overseas

0.4

0.7

1.0

2.5

3.1

Non-financial institutions

0.2

0.2

0.4

0.8

0.5

Total

0.8

1.3

1.6

3.6

4.7

2. Interest Rate Derivatives

Forward Rate Agreements

Financial institutions – local

1.4

1.1

2.9

2.4

1.4

Financial institutions – overseas

0.3

0.3

1.8

3.1

1.9

Non-financial institutions

0.3

0.1

0.8

0.2

0.4

Total

2.0

1.5

5.5

5.6

3.6

Swaps

Financial institutions – local

0.2

0.6

1.5

1.8

2.9

Financial institutions – overseas

0.3

0.5

2.2

4.2

13.6

Non-financial institutions

*

0.2

0.3

0.8

1.3

Total

0.5

1.3

4.0

6.7

17.8

Options

Financial institutions – local

*

*

0.1

0.1

0.1

Financial institutions – overseas

*

*

0.1

0.4

0.1

Non-financial institutions

0.1

*

*

*

1.2

Total

0.3

0.1

0.3

0.5

1.3

Total OTC Derivatives

Financial institutions – local

1.8

2.1

5.0

5.0

5.5

Financial institutions – overseas

1.1

1.6

5.4

11.0

20.2

Non-financial institutions

0.6

0.7

1.6

1.9

3.5

Total

3.8

4.6

12.0

17.6

29.5

(a) Adjusted for local inter-dealer double counting.
(b) Totals may not sum due to rounding.

Notes:
Financial institutions includes those reporting in the BIS survey as well as non-reporting
financial institutions.
* Indicates less than US$50 million.

Enquiries

Mr Keith Hall
Head of International Department
Reserve Bank of Australia
SYDNEY